I hope that publishers default on their royalty checks to these pro-default authors.

10:47 am December 7, 2010

King Cash wrote:

I wonder if the author will be hunted down for trumped up sex offenses in a foreign country for writing this book.

Good for him. The most tragic stories you will hear will be ten to fifteen to twenty years from now, when you meet someone who was a good boy or girl and diligently paid their underwater mortgage while sacrificing their lives. I'm pretty sure 99% of them will tell their grandchildren never to do something so stupid.

10:52 am December 7, 2010

True Capitalist wrote:

Brent White should be the next Chairman of the Federal Reserve! Kudos to him for helping people see through the manipulation of the powerful to help Americans make the best decision among terrible options. If everyone who was significantly underwater walked away sooner, perhaps the economy could get that kick-start it needs.

His next book should be about how the banks need to return to mark to market accounting rather than their current mark to fantasy valuations. Perhaps that would help speed things along too. First casualty: BOA. Break it up and start over. TBTF institutions need to be broken up into regional banks!!!

10:52 am December 7, 2010

Risk Interest Charge wrote:

Now maybe people will understand how interest rates are figured. Risk is part of any interest rate that is charged to a borrower. The bank and borrower can agree to terms on a 30 year mortgage. The borrower has subpar credit and is charged 7.5% APR. There is another borrower same income same home, but is considered a lower risk borrower and therefore gets the loan at 6% interest. The loan amount is $200,000. Both loans are paid off without a single late payment. The subpar borrower paid a total interest of $303,433 and the lower risk borrower paid a total interest of $231,677. Does anyone here think the bank is going to return the $71,756 overage to the subpar buyer after they proved to be worthy of the same interest rate the lower risk borrower paid? No, the bank will not do that. They used a calculation assuming the lower risk borrower was going to default and cost the bank money. Therefore, the bank has already covered for anyone who is walking away. They had an opportunity to put that risk in the interest rate and they did so and have always done so.

This article is simply letting people know that it is not a moral decision. There is nothing moral about it. The bank did not have to make the loan, and the borrower did not have to take it. It was all business. The bank does not care who is in the home when they foreclose on it. The bank can simply take a "Deed in Lieu of Foreclosure" as offered by many borrowers, but the banks are refusing to accept that. Well part of the note and mortgage agreement in plain english states if you do not pay for the home, then the bank can take it. However now the banks do not want to take it, the borrowers have to walk away. However turn the tables and when the market was good, the banks had no problem foreclosing on a home immediately did they? With the decline in housing prices, yes it absolutely is about how to get ahead, remember when you are in business you do not survive by customer service and protecting and collecting your money. Not by morals.

We have all been affected by this in more ways than one, I think people should do what is best for them. I certainly do what is in my best interest in everything I do. The respectful thing is to make sure you return your shopping cart everytime, be polite to others, hold the door open for the person behind you, leave a tip, and eat well.

10:57 am December 7, 2010

Risk of interest wrote:

Please excuse my line "you do not survive by customer service and protecting and collecting your money" It should read "You survive by....", Not by morals.

It is ALL the Chinese governments faults that we are so far in debt. They will understand and accept their FULL responsibility when this jerk explains it to them. 'America, the land of the FREE.'

11:08 am December 7, 2010

Kevin T. Williams wrote:

Part of my legal practice involves debt relief and bankruptcy. It is all too common for people to come to my office after depleting exempt assets -- like retirement accounts -- and still having no alternative but to file for bankruptcy. An honest assessment of options at an earlier stage would have left them in much better shape. However, most of these folks were delayed in so doing by real and imagined social impediments. Mr. White's analysis may help people out of this morass in a more timely and expeditious manner.

11:10 am December 7, 2010

Rick Santelli wrote:

Now the hard working producers in this country are going to have to pay for the lazy slackers who bought new cars, added a gourmet kitchen and another bathroom to their over-leveraged McMansion.

This guy should be put in jail for treason.

11:18 am December 7, 2010

Carl wrote:

"No one is entitled to sit in judgment of you."

Well, except a judge. For example, a bankruptcy judge.

11:32 am December 7, 2010

Jerry wrote:

If the bank wants to lend me $1,000,000 with my watch as collateral, don't expect me to pay back the loan.

11:34 am December 7, 2010

Dan Green wrote:

Quite an elementary decision. If those upside down on a mortgage, spreadsheet staying or walking, it is a no brainer. As always, we have these inane decisions, because mortgages were made affordable, to scores of people, who were unable to see the consequences, if the value of the home did not evaluate. Logic of course is a difficult area to pursue, however logic told us, the price per sq. ft, of the pre meltdown price, was not logical.

11:48 am December 7, 2010

MDO wrote:

It will be years before anyone sorts out the real reasons for the housing value collapse. One of the issues that Professor White undobutedly addresses is that you have to live somewhere. My issue with his walk away analysis is that mortgage payments are actually rent and the amount you pay to live somewhere.

Professor White seems to advocate - sit in your home for as long as you can and don't pay for it; bank the mortgage payments you would otherwise pay so you can (eventually) move to another residence with thousands of dollars of money owed for "rent" in your pocket that you can use and spend on fun stuff while you live rent free.

So - the greedy bankers are at fault and if what Professor White is advocating is prosecution of the bankers who literally stole billions of dollars in the securitization schemes, OK. It is not clear to me how arguing that the bankers are at fault allows a homeowner that has a monthly rent bill to escape that obligation and "steal" dollars from the greedy bankers (actually it will be us that pay that tab) while living rent free for many months before walking away from the home.

This is classic - "they got theirs so I get mine" - but as Mr. Santelli accurately points out - we who play by the rules get stuck.

11:49 am December 7, 2010

John Galt wrote:

It's an interesting position to argue for self interest as the basis for our economic model (notice how I avoided calling it Capitalism), and then replace the self interest with moral duty when the outcome is less than convenient for the collective.

It's perfectly rational to mail in your keys on an underwater home, or, at the very least, it's rational to evaluate all available options before making a decision. The Gov. & the banks would have you believe otherwise.

11:49 am December 7, 2010

True Story wrote:

Home in Florida purchased 2006 - price $364K - put 12.5% down.
Added HEL's 2007 - Fair Market Value rose to $487K
Bubble Burst 2008 - Lost Job Jan 2008 - FMV dropping monthly like a rock.
Re-employed March '08, traveled cross-country for a (better) job.
Tried to do Mortgage Adjsutment with WFHM.... no deal... TWICE. Made TOO MUCH money to qualify.
Hired my own attorney to "reason" with them. They wouldn't.
Decided to do a Strategic Default. Ceased Mortage payments Jan '08. Still haven't made one since.
WFHM started foreclosure process in June '08.
Still living in it today. Went to court-ordered mediation last month. Failed miserably.
PRESENT Fair Market Value - $175K and still falling.
Headed for foreclosure auction.
WFHM keeps delaying auction date hoping local market will stabilize.
It won't for years to come IMHO.
Walking away in January and tossing them the keys.
Best thing I ever will do/did.

12:06 pm December 7, 2010

Mitchell Ross wrote:

If you are under water, I don't think there is any obligation to continue paying. However there is an obligation to move out. One or the other ... hand in the keys and leave, pay rent elsewhere, or pay it where you are. But to live in the house for free is stealing from me - because my taxes. fees on my mortgage, or some other cost imposed on me will eventually be used to pay what was your free rent.

12:06 pm December 7, 2010

Denim wrote:

The banks took the risk. They lose. A good bank is bigger. These banks should be smaller.

12:09 pm December 7, 2010

Beancounter wrote:

All this makes me feel stupid for paying off my mortgage a few years ago, and trying to live debt free. I get near zero interest on any savings, and my house isn't worth as much as it was. If only I had known (sarcasm) that I should mortgage my house to the max, when the market as at its high, and then default, my net worth would be greater now. Think how many TV's I could have bought with that home equity loan.

You can't walk away from other debts without bankruptcy. The same should apply to housing. The rules that treat mortgages differently than other debt in most states are just one more subsidy for the housing industry.

12:12 pm December 7, 2010

T. Traub wrote:

People can consider themselves free to walk away from their mortgages. That is the new 21st century American approach to loans.

That's fine. But we taxpayers should not continue to subsidize these people's mortgages if they don't take the responsibility seriously. Eliminate the mortgage interest tax deduction, eliminate all these regulations and programs that force banks to grant mortgages to the under qualified, and let the free market decide who gets to buy a house.

Then we will probably see (1) a dramatic contraction in the housing market and (2) a dramatic reduction in deadbeats. Works for me.

12:21 pm December 7, 2010

Jaime wrote:

Let's all remember that a home is a long term investment. If you want to do your part to help the housing market recover, please consider these two thoughts.

1. If you were laid off, are struggling to find a new job and can't make your current mortgage payemnt, it's okay to walk away from the home you had hoped to keep.
2. If you have a firm stance on your employment, it's not okay to walk away; stick it out and wait.

In cycles, what goes down comes back up. The housing market will be good again; just you wait.

12:25 pm December 7, 2010

Rationally Thinking wrote:

I decide to do some good. I have $500,000. I lend it to you at 8% so I get $40k a year. That's enough for me to live and do my regular job which is volunteering at the local homeless shelter every day. You lose your job, the market value of your house goes down, and you decide to stay there but not to pay me the $40k a year. I have no money to foreclose on you. I no longer have $40k to live on. I can't afford to pay my rent. I need to get a job that pays, hopefully $40k a year. The homeless shelter and its residents no longer will have me for free.

Looking at that, how do you now feel about walking away?

12:25 pm December 7, 2010

Keith Sharp wrote:

Who is hurt by a walk-away? 'The bankers' presumably means the current holders of bank stocks - in a lot of cases currently that means taxpayers. The people who were holding bank stocks 5 years ago when the loans were made? Mostly wiped out when bank stock prices dropped. Given the bail-outs, aren't taxpayers the main group hurt by the walkaway?. The people who really may have profited permanently by the housing bubble are those who pocketed the commissions and fees and margins, and those who sold a house near the top of the bubble and rented. There's no way to get the money back from them.

Is it immoral to walk away if it's taxpayers who are hurt? Well, certainly less moral than it would be if instead it hurt the knowing perpetrators of this trillion dollar deception, or the sleeping regulators,

12:26 pm December 7, 2010

Brew_S wrote:

Very well put

12:28 pm December 7, 2010

Sam Samedi wrote:

I think morality has pretty much evaporated at this point.

A moral person is only going to consider what he/she should do in their life, REGARDLESS of other parties. Just because a shady bank isn't entirely on the up and up, this has absolutely nothing to do with me. It is my soul - not the bank's soul.

We live in a time of endless self-gratification. Gratification precludes abiding by any moral code. If it is possible for one to be dishonest and cheat on a deal, then it's "all good", as the kids say. I would even say that people who cheat may consider people like me who DON'T cheat as being "fools".

12:33 pm December 7, 2010

NB wrote:

Clearly, anyone with a car loan that is underwater should also walk away as any rational bank knows that a car loses significant value quickly. Shame on the banks for making high LTV car loans. There are also a very large amount of above market property leases that were based on inflated commercial real estate values. These should also be walked away from. The excess cash saved by these lessees can then be reinvested in more productive endeavors.

12:47 pm December 7, 2010

GBG wrote:

I decided not to buy 4-5 years ago when houses were over priced because I knew I couldn't afford it. Now I'm still a renter with little hope of getting a loan. Good news is that I'm not underwater. Bad news is that I'll get absolutely no handouts from anyone as a result as I watch MY tax dollars go to those who "foolishly" overspent/overpaid for their homes etc. Who's the fool now?

12:47 pm December 7, 2010

Rationally Thinking wrote:

A homeless man stops you, explains that he has no job, can't get one, and has a wife and kid living in his cardboard box. He asks you to give him $10 so he can buy dinner. You say you're sorry but can't do it and walk away. He tackles you and steals your money. Later that day he is arrested at the local MacDonald's where he, his wife, and his kid are eating dinner with the money he took from you.

What should be done? Is it OK that he took your money? Suppose he now targets you every day knowing that you have money and he can easily knock you down and take what he needs. Is that a problem?

12:54 pm December 7, 2010

Sam wrote:

Beancounter wrote that he paid off his mortgage and was living within his means. Sounds like a practical person who keeps his word.

Here is what I would like to know—how will the Beancounters of the world get mortgages in the future reflecting the lower risk they present to the lender? Unfortunately, I don’t believe the lenders will be able to make that decision when a norm of our society changes from honoring debts to just walk away when there are problems. Future quality borrowers will be stuck with higher rates to cover losses from the rest of the crowd.

Life events can cause a problem for anyone, but let’s not kid ourselves—when walking away from a house mortgage is seen as a the right thing to do, we all will pay the price

1:02 pm December 7, 2010

Old Indie wrote:

The unspoken issue here is the US Government GUARANTEES of mortgages. The problem described is a political problem. That political problem has lead to financial and moral abyss' in the article.

Substitute the word "Automobile" for the work "Home" in the above article, and "Loan" for "Mortgage"

Suddenly, the problem is clear. The US Government distorted the economy by backing mortgages.

People like Barney Frank sold the country down the river. And, the 'good' people of MA re-elected him.

We deserve the government and the economy we have.

1:03 pm December 7, 2010

JB wrote:

So let me get this straight. If you get a mortgage to buy a home and the value goes up, you get to keep the money; if the value goes down, you get to stop making payments and live in it for free until you are legally evicted. No one is talking about investor's risk here, there is none. Call it self-interest or call it a mugging, it is theft all the same. And since the lender is legally required to report the loss as income to you on a 1099, wait and see what the IRS calls it.

1:13 pm December 7, 2010

Old Indie wrote:

A poster sez "There do not appear to be any morals in businesses such as.."

Does that excuse any person's lack of personal morals?

As my child use to say '..but everyone else does it!"

Like Bill Clinton, Charlie Rangle, etc.

1:14 pm December 7, 2010

I'm confused??? wrote:

There do not appear to be any morals in businesses such as, banks, insurance, pharmaceutical, tobacco, energy and of course the biggest biz of all, the US gov't so why should the little guy be expected to "do the right thing". Walk away from those underwater homes if it makes economic sense. It is nothing personal, just business!

1:14 pm December 7, 2010

PAH wrote:

If you have lost your job (or your spouse has and your family depends on two paychecks), if you have major medical expenses, or other major unexpected expenses and paying your mortgage is indeed impacting your livelihood by draining your savings, it may be the best option. But to stop payment merely because the house is worth less than you purchased it for while your situation has not altered, is not morally correct.

1:17 pm December 7, 2010

Roger B34 wrote:

Very nice summary of a controversial subject.
"(Left unsaid is that taxpayers, too, could bear the costs of mistakes made by lenders, Fannie, Freddie, the government, and homeowners that walk away.)"
In 1948 we had a President with a sign on his desk: The Buck Stops Here.
2010 we have a President who acts The Buck Doesn't Stop Here.
And we have Not The Greatest Generation who pattern their behavior similar to our President.
I do not disagree on the culpability of Government in the housing bubble and subsequent market and economic meltdown. Who voted Government? Wall Street greed was rewarded in the meltdown process.
The home buyer is 50 percent responsible for making the decision. Cannot be blamed on ignorance or conned.
In the end, residual costs will be transferred to the taxpayer.

1:18 pm December 7, 2010

Market Solutions wrote:

The closest thing to a solution is mortgage modifications, based on current interest rates, not the inflated rates of a few years ago. Individuals still have a moral obligation to act rationally in the interest of their families, based on what they can get from the market.

If you paid off your mortgage and are living debt free, you are already enjoying the lack of a need to borrow money at rates that reflect recent risks. The government would get the most bang from its buck by "subsidizing" the interest rates to be low on modifications, and letting the market take care of things moving forward.

1:23 pm December 7, 2010

Samedi wrote:

confused:

If you base your own morals according to how others behave around you, then you cease being an individual. In fact, you become an animal. Animals base their behavior purely by how the herd acts and thinks.

I imagine some animals, in their own way, are happy creatures. So if this works for you, go for it.

1:33 pm December 7, 2010

What's Moral? wrote:

If it's "moral" to walk away from home mortgage debt, even if you can afford to pay, then where is the "moral line" drawn?

1. Is it OK to walk away from your car debt if it's value is below the amount you owe, as some have stated?

2. Is it OK to walk away from credit card debt, because there is no collateral securing this debt?

3. Is it OK to walk away from debts you may owe your family or friends, since you never signed a contract?

All of you amoral types seem to think that if it's legal to walk away from your obligations, you should do so, and justify this position by claiming that if others behaved unethically, you should too!

Really?

1:34 pm December 7, 2010

norm ellis wrote:

Mobile home owners, STOP paying your mortgage. Your home dropped in value the day it was delivered. You live in the "land of the free."

1:35 pm December 7, 2010

norm ellis wrote:

What about mobile home owners?

1:36 pm December 7, 2010

NE wrote:

What about mobile home owners?

1:47 pm December 7, 2010

Holly wrote:

A home is NOT a good long term investment, unless you paid cash for it, or had one heck of a down payment! I hate it when people think they are 'saving' money by buying a house. Let's say you live there 30 years, how many roofs will you need; how many appliances will you go through, what about the carpet, windows, lawn care, snow removal, and the tree topper! the interest on the loan that actually doubles the price of the house, if you didn't pay cash! By the time all this accounted for you will be lucky to break even. What if I showed these ROI numbers on a company I wanted you to invest in?

And in direct response to the 500k loan @ 8%, you are taking the risk by lending your money. If you don't want to take the risk, but government treasuries. (On another note, maybe if you didn't charge 8% the person wouldn't be bankrupt.

2:15 pm December 7, 2010

Bob wrote:

As a follow up to What's Moral.

The other day I heard that 40% of seniors are carrying credit card debt that they plan to die with,

meaning you and I get to pay it off through higher interest rates / fees.

Our new "morals" are going to be the end of this country.

2:54 pm December 7, 2010

Silly wrote:

Bob, that's silly. If you carry an average balance of ten thousand dollars at twelve percent long enough, you can't die quick enough to come out ahead.

4:47 pm December 7, 2010

RB wrote:

Doesn't the financial impact of defaulting depend largely on whether or not the individual state's laws allow recourse loans? If the mortgage loan is non-recourse, then the defaulted borrower on an underwater mortgage only suffers a damaged credit rating. If the mortgage loan is recourse, then the defaulted borrower is still liable for the full loan and may be forced into bankruptcy.

4:53 pm December 7, 2010

Turn this to Insurance wrote:

To those of you who say. The overspenders and the fools blah blah blah... Let's turn this into an insurance issue now. I complain how high insurance rates are. I am very healthy always have eaten my fruits and vegetables, eat fish two times a week, beef, and chicken the rest of the days. I cook my meals baking and steaming. I do not fry anything. I excercise every day at 5:00 AM yes even getting up when it is very cold out to go exercise. Well there are millions upon millions of people who do not cook and eat at fast food restaurants and those who do not excercise. There are many smokers out there, people who abuse alcohol, do drugs, and so on so forth. These people go the emergency room, doctor, and have life changing/altering events with their health that in turn cost the insurance companies more money. Therefore the insurance companies charge me more. I already take great care of my body and it costs me more to eat well and to pay for a gym and it takes my time to exercise. But yet few other people do and for that I pay the price in higher premiums because of these "fools". So for those fools to call someone else a fool and to say someone else is costing them money is absurd to me. Because they are the reason that insurance premiums cost so much. So let's stop with the who costs who money. It seems weird to say this but.... "we're all in this together?" Is that accurate? It sounds terrible huh? We can point fingers but everyone forgets how they negatively affected the other person.

5:35 pm December 7, 2010

Insurance wrote:

Right ON!! it is amoral to be overweight as you place the burden on healthy folks.
It's amoral to be overweight on a plane!

5:46 pm December 7, 2010

WILLIAM wrote:

Ask your lawyer about the theory of "Alternative Performance" and its use every day by banks who make home mortgages.

6:03 pm December 7, 2010

Ron wrote:

These bankers created this bust through bad lending practices. Then they get bailed out by the taxpayers/mortgagees. The next year they earn record bonuses. How is that for morals or fairness????
The bankers who made the mortgages tanked the economy, caused many businesses to fail and many to lose their jobs. They should pay a steep price for that, not be rewarded with record bonuses. The government should let them fail and not bail them out, so the cost does not fall on the taxpayer.

7:00 pm December 7, 2010

Jiminy Cricket wrote:

@ What's Moral?
I think you should consider the morality from the bank's/credit card company's/auto loan company's perspective as well. How often does morality figure into their actions?

Is it moral to begin foreclosure proceedings on a homeowner that loses her job and falls behind on payments, even after years of timely loan service?

Is it moral to charge consumers 19-29% interest rates when overnight bank rates are 1%?

Is it moral to come repossess a family's car in the middle of the night for missing payments, even though they may have tried in good faith to sell it but cannot due to the rapid loss in value of that car the moment they drove it off the lot?

Well, the answer to these and many other questions is "it doesn't matter." Morality isn't figured into anything when dealing with contracts, contract law is. That's why you see billionaires like Donald Trump and many others "hand back the keys" to their bank on multi-million dollar development deals all the time and not lose a wink of sleep, all the while safeguarding their personal assets. (Unless you're Bruce Elieff, foolishly offering up a personal guarantee on SunCal's loans.)

These bankers are big boys. They can clean their own mess when they crap the bed. Oh wait, no, the American taxpayer actually just did that for them. That's twice in 2 decades, counting the S&L debacle. Fool us once, shame on you, fool us twice, shame on us. Or as George W. so eloquently said, "...er, we won't get fooled again!"

The banks have their remedy. Mr. White is dead on. The banks are just bummed because people are getting a glimpse of the not-so-scary wizard behind the curtain.

8:41 pm December 7, 2010

JonFox wrote:

Morality has very little to do with the mortgage situation. The banks offered to loan money on the condition that they would hold the deed to the property until the loan was repaid. If you don't pay them back, they take the house. Those were the terms of the agreement and both parties have to abide by them.

I do agree that it is wrong to stop payment and continue to live in the house for as long as possible. I think if you decide to walk away, you should work as quickly as possible to relocate to another residence.

9:58 am December 8, 2010

Scott wrote:

Perhaps we need to bring back the debtors' prisons, to handle the huge wave of homeowners who were speculators, and when it didn't work out, think it's ok to just walk away from their homes and screw their neighbors (whose house will be devalued 1 to 3% instantly due to next door disclosure). I doubt this (insert your favorite synonym for moron here) Brent White wouldn't be in favor of HIS neighbor walking away from his mortgage.

10:30 am December 8, 2010

Bill wrote:

When we bring up morality, we can't forget that real estate agents, appraisers, and mortgage brokers are also responsible here. They pushed people into offering more than they could afford (in the long term) for their homes without coaching them on the real risks. This accelerated the bubble as much as any party involved.

But the commission-side of the real estate industry wins on both the up- and down-side of this bubble, while the banks, homeowners, and taxpayers bear the burden of the collapse.

The long-term winner in all this is our foreign debtors, who may soon see the collapsed US real estate market as a far better way to spend their trade deficit dollars than US debt obligations.

10:49 am December 8, 2010

Chuck E Cheeze wrote:

Screw the banks, the taxpayers saved their asses and they won't reciprocate. Let them have the house & move on. Yeah, we all pay, but aren't we anyway?

11:43 am December 8, 2010

M R Goodwin wrote:

It's an interesting thought, and I'd be interested to read the book. I am, however, confused why the author of the article felt the need to throw in the parenthetical: (Left unsaid is that taxpayers, too, could bear the costs of mistakes made by lenders, Fannie, Freddie, the government, and homeowners that walk away.)? Why did the author use this construction: ... blame to go around, and that “a little of it” belongs on... ?

These elements are not analysis, and the article seems to have been a review, not an op ed. Is it really that difficult to get out of the way of the story?

11:48 am December 8, 2010

realist wrote:

A mortgage is a secured loan, an agreement between the borrower and the lender that if the borrower fails to repay the loan, the lender gets the security or collateral, i.e., the house.

There is no prissy “morality” involved — the real MORALITY IS that the borrower loses the house to the lender should the borrower default. It’s in the contract. Both sides know what is at stake going into the deal.

That is precisely why the lender requires a pre-loan appraisal, casualty insurance, and proper upkeep of the property.

Cars, major appliances, sometimes furniture and other expensive items can all be “re-possessed” if the borrower fails to make payments. Are all those borrowers “immoral”? Are all those lenders “victims”? Are all those contracts just fables with only one “moral” ending?

People who walk away from mortgages PAY and dearly. They lose their home and their credit rating, which can badly affect their ability to even rent a new home, let alone buy, or to get a job. Sometimes they lose a life-long dream and even their self-respect.

And what happens to the lender? Now he owns a property he contracted to take in these very circumstances.

Editor Comment

12:54 pm December 8, 2010

Emily Peck wrote:

For those of you interested in continuing the conversation about walking away from an underwater mortgage, Brent White will be taking reader questions tomorrow at 2 p.m. EST. You can ask your question now.

1:11 pm December 8, 2010

ScrewTheBanks--Walk baby Walk wrote:

Hey, these banks have proven themselves to be fraudsters--heck , they even wrote derivativites they knew would fail while at the same time writing new $500K loans to janitors! Everyone who was involved in "moving" properties was fraudlent! Appraisers, real estate agents, brokers, buyers--everyone knew it was too good to be true. And you poor good buyer, who put a good nut down, you're seeing your equity evaporate, your home drop in value--get over it--YOUR HOUSE WAS NEVER WORTH ANYTHING OVER THE LONG TERM INFLATION TREND! Where your house ends up, is where it ought to be given inflation and wage trends. Grow up and stop crying like a little baby just because people are walking away with $50K-75K and will be able to buy again when the credit rating agencies realize that millions of homeowners were a "victim" of predatory lending and it was a one off event! Pay all your bills except for that overdue mortgage. Thw WSJ just sent out a piece showing avg time in home from last payment to eviction--492 days--it may be getting longer as the MERS / Robosigning debacle unfolds. Save that loot! Screw the bankers! POwer to the people!

1:43 pm December 8, 2010

Mike from New Hampshire wrote:

If you are considering walking away, don't. Go see a good real estate attorney who is NOT also representing banks or mortgage lenders and find out what your options are. These banks will sell your bad debt to some bogus company who will come after you even if it's YEARS later...you want to get out of this NOW, totally. You might have to go bankrupt but so what? The clock will start ticking and you will be free of that God-Awful mortgage that is weighing you down. Then, don't do it again. Ever. Invest your $ in something that IS an investment. And don't ever EVER trust a bank again. They s--k. One more thing. Home "owners" who are in debt up to their eyeballs, as well as banksters will try to tell you that you are corrupt and a fraud. Tell them f--k you.

2:01 pm December 8, 2010

Disgusted wrote:

A promissory note in my state -- secured by a house or a car or nothing -- says "I (the borrower) promise to pay..." It says nothing about only if the collateral maintains its value, nothing about unless there is a recession. That note is signed willingly. Those who claim the evil bank tricked them into borrowing so much money are using stupidity as a defense. Stop whining about everybody else and take responsibility for your actions. This bizarre sense of entitlement and thinking only of one's self in the short-term is destroying our country.

2:29 pm December 8, 2010

Holmesian bad man wrote:

I approve this publication.

3:26 pm December 8, 2010

Anonymous wrote:

This is the problem with society and these decisions in the first place....no accountability for what got someone there in the first place and then, abandoment when it's too difficult! The rest of us who live within our means get penalized by paying higher interest rates and end up bailing out these slackers in the first place.

3:40 pm December 8, 2010

Anonymous wrote:

i think a lot of you are missing the point. a contract is a contract. if it says that a homeowner can walk away and all the lender gets is the home, that's the contract. end of story. it's business. any good business contract contemplates a failure to perform, and the recourse for a failure to perform, and mortgage agreements are no different.

full disclosure: i've never defaulted on anything.

4:50 pm December 8, 2010

robert wrote:

about recourse, it is interesting that a buyers of mortgage notes have more recourse against fraud and hegligence than the buyers of homes. That is insane. Personally, instead of walking away, I would prefer to get principal returned by having the "underwater gang" sue (large class action) the underwriters, regulators, etc. for gross, systemic negligence. They even admitted to it. I am not a big lawsuit person but this thing stinks to high heaven and the DOJ is missing in action. Even if a case is lost, at least there is the satisfaction of having a day in court.

4:51 pm December 8, 2010

Wilk Rowe wrote:

Those who think that it is morally wrong to break a contract misapprehend the role of contracts and contract law. There is a reason for the distinction between contract and tort law. (A "tort" is literally a "wrong.") And the distinction explains why punitive damages are not available for breach of contract and why penalty clauses that fail to reflect a reasonable prior estimate of actual damages are unenforceable. The law expects us to breach contracts when the liability from doing so, which is supposed to be equal to the cost to other party of our breach, is less than the cost to us of performing. The law is designed to allow breach in such cases, because that is the economically efficient outcome -- the outcome that results in the smallest loss overall. Economists who study the law call this "efficient breach." If the law added extra penalties to discourage efficient breach, the total wealth of society would be reduced. Moreover, the risk from entering into a contract would be greater, with the result of fewer economic transactions and less wealth creation. From this perspective, the only problem with borrowers walking away from their mortgages is that they generally don't have the cash to pay any shortfall after the home is foreclosed on, so they can't compensate the lender for its loss. But this credit risk is priced into the original bargain, or would be had the lender not miscalculated.

5:29 pm December 8, 2010

Bob Diamond wrote:

Individual homeowners need to do what is in their best financial interest because it is a "business decision" for their future and family. If that means not paying and letting the lender have the house then they should do so. Remember that the bargain between the borrower and lender is only the note, mortgage and other loan documents. The lender had all the bargaining power when those documents were drafted and chose to draft them as lender saw fit. Those documents define what happens if the borrower does not pay. The decision whether or not to pay is not a moral question any more than it is a moral question over whether the lender can lay off workers or fire them the week before Christmas.

6:05 pm December 8, 2010

orion wrote:

ok Anonymous, you are pretty smug from where you sit it seems but if you TRULY 'live within your means' as you state, then you then would have no need to borrow money for a house or otherwise. Therefore your sentence regarding the higher interest rates i.e.'The rest of us who live within our means get penalized by paying higher interest rates'...makes no sense, hypocrite. The prices of homes were and continue to be inflated becuase of banks greed and misrepresentation and manipulation of the loan market. The home prices continue to be inflated because of governemtn intervention and manipulation of interest rates and banks via bailouts, to "prop up' the market. It makes sense that the banks and the government should shoulder the burdens and get their 'property' back that they manipulated the market to sell and prop up. If they would let the market speak, homes would be a lot lower priced. For the record, in case you are wondering, I have been a renter for 16 years in the same apartment, and have never owned a home. I refuse to play the game and chose to invest elsewhere than real estate.

7:38 pm December 8, 2010

The Home Builders Did It... with the Lender in the New Subdivision wrote:

I have not seen any mention about Home Builders in this blog. Is it not the home builders who required these buyers to use one specific lender and not only the one specific lender but one or two specific loan officers with that lender? If the buyers chose not to do so then they would be required to pay... and read this closely... T.W. Lewis in my community required $45,000 Non-Refundable earnest money. Yes you read that correctly $45,000 Non-Refundable earnest deposit if a buyer chose to use their own lender. How about the $50,000 to $100,000 in incentives for using the builders lender... Yes in other words they would give a discount of $50,000 to $100,000 if you used their lender meaning if you used your lender they would charge you $50,000 to $100,000 more than the next person. You ask "What about the appraisal?" Well guess what the builders and lenders simply manufactured appraisals because they are allowed to discount any home to anyone they so choose. So yes all of the homes could be given an appraisal based on what the builders were pricing them for and the discounts to others would not be counted. Plus the whole idea of this was to deter people from using their own lenders, Therefore if an outside lender said "hey there is no way we are putting a mortgage on this house $50,000 to $100,000 over the next house" then guess what... the home builders and their lenders win again because now you have already put your earnest money down and you have to use thier preferred lender. Wow! Wow! Wow! Now knowing this do you think those lenders gave the best deal possible? haha not even close not even close... Also think about the pool builders by the way... A preferred pool builder is at every community. Here is how this works. The preferred pool builder can build the pool during the construction phase of the rest of the house and be done by the time it is finished. Guess what... if you did not use them, then your pool builder would have to wait until the construction was compeleted before they could begin. How much do you think those pool builders discounted for their services. If you said "None, they actually charged more because you had to use them" then ding ding you are correct. Why is the pool builder important? Well because the lender could simply deny your loan if you had an outside pool builder by saying you are not qualified because they cannot extend the loan that long or keep funds in escrow. However if you use the other pool builder we can qualify you with no problem.

Then you even had to use their contracts and their title company. Additionally they were putting liens on the titles to these homes to prevent the buyers from actually reselling them!!!! So before the market turns to crap you cannot even sell your home!!!!!!!!!

Now THAT is how 90% of this happened. And these were buyers out looking on a sunny Saturday afternoon and decided to waltz in a beautiful model home, speak with a well groomed sales agent and strike a deal.

Cut and Dry.

12:47 am December 9, 2010

Florida defaulter wrote:

@ anon - we boom buyers paid multiples of your prop tax bill, we have carried an undue burden supporting the locality. and you were unjustly enriched by the appreciation our sale prices created for your house, you're welcome. all you did was sit still, and you made more money on my house deal than I did.
sneer at someone else once you have your facts straight. good luck with the community overhead once our sky-high prop tax checks are history! and the tanked comps will send you down the chute also.
payback's a witch!

4:15 pm December 9, 2010

Maryn wrote:

Please read "The Big Short," by Michael Lewis, for a very clear picture of how the financial industry created, orchestrated, intentionally manipulated and profited hugely through the subprime mortgage market. Not from the loans themselves, but by the bond packages they were rolled into - and ultimately - when they saw that the house of cards they had created would inevitably come crashing down as millions of people faced balloons they couldn't afford - they actually BET AGAINST the homeowners by taking out a form of "insurance" guaranteed to pay them back 100 times or more if the homeowners default.

It's staggering.

That said, the "walkaway" question is a clear one morally for people like my daughter, who actually income-qualified for her mortgage through ACORN, until then a respected nonprofit that helped low-income people achieve the American dream of home-ownership. When housing prices crashed, she went upside down. Knowing what I know now about how the whole game was rigged against the homeowner from the get-go I have no hesitation advising her to walk away.

What galls me - and this is me being judgmental - are the people who took out second and third mortgages against the inflated values of their homes, used the cash to buy boats, pay for vacations, etc., etc. - AND are now walking away. With their boats and vacation memories intact. THAT is wrong. Any righteous system would it seems to me take this kind of cashing-out-the-mortgage-then-walking-away scenario to task and require that the cashout be repaid - just as it would if it were a cash advance on a credit card.

Comments anyone?

6:29 am December 11, 2010

WHOAREVICTIMS wrote:

WHO ARE THE VICTIMS??? DOES ANYONE REALLY BELIEVE THAT THE PEOPLE ........ WHO BOUGHT HOMES AT 100% FINANCING (ZERO DOWN), WITH OPTION ARM(NEG. AMORTIZATION) THEN REFINANCED WITH CASH OUT, GOT SAME OPTION ARM PROGRAM, THEN REFINANCED AND GOT CASH AGAIN AND AGAIN UNTIL THE MARKET VALUES CRASHED........DID NOT KNOW WHAT THEY SIGNED, DID NOT KNOW THE PROGRAM??? WHAT ABOUT THE CASH THAT THEY ARE GETTING OUT FROM THE REFI??? WHERE ARE ALL THE CASH??? SPENT, SAVED OR WHAT??? THEY USED THEIR HOMES LIKE AN ATM. NOW THEY CRY, THEY ARE "VICTIMS". THAT IT'S THE FAULT OF THE BANK, THE REAL ESTATE AGENT, THE BANKS AND EVERY ONE ELSE BUT NOT THEIRS. THEN THEY WANT A LOAN MODIFICATION...SO MORE CASH FOR THEM. THEN MAYBE THEY CAN DO A SHORT SALE OR MAY BE THEY WILL FORECLOSE. IN THE MEAN TIME, THEY ARE STAYING IN THEIR HOMES FOR "FREE" WITHOUT PAYING THE MORTGAGE, 1 OR 2 OR 3 OR 4 YEARS."FREE RENT"...MORE CASH FOR THEM. TO MAKE MATTERS WORSE, OUR GOVERNMENT CREATED ALL KINDS OF LAWS TO PROTECT THEM. WHO ARE THE REAL VICTIMS------NOT THEM. THE REAL VICTIMS ARE THE GOOD TAXPAYERS,

.

10:20 am December 11, 2010

theCanimalsHusband wrote:

Everyone who gamed the system: Congress bribed by campaign cash, builders, lenders, investment banks, people with big mortgages caused this mess. I did not gamble and when i realized interest rates were going to zero, paid off the mortgage. I live within my means and if Bernanke doesn't ruin the US Dollar by continually printing more money out of thin air via QE2, 3, etc, i will be ok.

10:24 am December 11, 2010

Wes wrote:

Our capitalistic society depends on an educated consumer. Since this isn't the case our capitalistic society prays on an uneducated consumer. An uneducated consumer to me is EVERYONE, I went to college for finance so I understand it and can act all high and mighty since I understand how not to get duped. But heck if I go to the doctor or car mechanic I can get taken for whatever they tell me. Hence, the problem is in sales, these banks train and reward their employers to be word smiths (I worked at one), as the article says there is a lot of blame to go around, but a little bit of it belongs with homeowners. I bought a house I could afford and haven't had any problems but my experience in banking helps me understand why others have and if you could blame them for anything it's for being trustworthy of the dishonest person they received their mortgage from.... The banks are the bad guys use Credit Unions!

10:42 am December 11, 2010

RJKL wrote:

WHOAREVICTIMS, a majority of the people are not those who used their houses as ATMs. This describes a small portion of the people underwater. Most bought their house, and then the market collapsed, leaving them immediately with a house that was worth far less than they owed.
I'm one of those people. We bought our house, and within just a few years, it dropped $80K in value. That's a THIRD of the value, and we were lucky... two friends of mine lost HALF their house's value within a handful of months. Now I'm going through a divorce (my friends are having a baby in a month). My estranged husband and I will be paying into this mortgage for about TEN YEARS, just to get to a point where we can sell the house, because a majority of your payment goes towards everything BUT principle; meaning, we will be forced to live in this house together and delay our divorce for TEN YEARS, just for a chance to break even. It's the only option we have because neither of us can afford to have our wages garnished to make up the missing $80K, or can afford to pay the mortgage and, separately, rent in an apartment.
How could we, or my friends, have seen any of this coming?

10:51 am December 11, 2010

RJKL wrote:

I'm going to further what Holly was getting at.
Buying a home is NOT a good investment, not even when the economy was fine. You hear all the time "Oh, I bought this house for $100,000 and 30 years later I'm selling it for $500,000!" Really? With interest, that house probably cost you at least $350,000, probably more like $400,000. Then you had to pay thousands of dollars each year in property taxes, hundreds in insurance, thousands more in repairs and upkeep, thousands in utilities, additional equipment (snowblower, yard maintenance, etc.), and so forth.
And when you do sell your house, where do you go? Into another house, at the "current" rate (in which case you're just going right back into the system), or into a nursing home, or you rent. So how, exactly, do you get out ahead? Instead, you could've stayed in an inexpensive apartment all those years, had cheap utility bills or none at all, never worried a day about lawn or snow maintenance, and invested the additional money to have a nice little nest egg in 30 years' time.
Home ownership as an investment is a crock.

11:18 am December 11, 2010

Waves wrote:

When the housing market was booming and property values were skyrocketing upward, many people were buying homes and reselling them at a substantial gain. They didn’t really care what type of loan they got, i.e. ARM’s, because they were only going to live in the home until they could sell it and make money. Lending institutions didn’t share in these capital gains, but now that property values have tanked, people like this author seem to think the lending institutions should share in the losses. His theory: MY gain is MY gain. MY loss is YOUR loss. I haven’t read this book, nor do I intend to, but he seems to leave out the fact that in many states, just because one walks away from a home/mortgage, it doesn’t relieve one from one’s mortgage obligation. The lender has several years to recover damages from the defaulting buyer. So depending on the lending institution and how aggressive they are with walk-aways, the borrower could be faced with paying for a home they no longer live in.

1:21 pm December 12, 2010

A1 wrote:

Thanks goodness Wikileaks will bring the truth out of the darkness, so we can see who,s who on all this mess and whose were really bankrupt at the time of the seize of F_F, what for and whose benefited the fall of them. Thanks Wikileaks, to discover the false face of the politicians and leaders worldwide

10:16 am December 13, 2010

Kim G wrote:

It is important that when a homeowner faces walking away as an option they handle it with the bank so they don't have deficiency balances etc. The homeowner needs to be educated in the systems available like deed in lieu or foreclosure with full forgiveness to ask for the best long term solution for both homeowner and banking institution to resolve the issue without further legal expense.

8:29 pm December 16, 2010

San Francisco Justice wrote:

@Maryn,

You can let go of that anger. Those 2nd and 3rd loans typically are not free when someone walks away. It's only thru declaring bankruptcy -- which is no pleasant experience -- that they can get out of those obligations.

As Brent White explained in the chat: "Non-purchase money home-equity loans are full-recourse loans even in states that are non-recourse for purchase money mortgages like Arizona. Cash-out refinances are also typically full-recourse loans. This makes sense. If someone has used the equity in their home to send their children to college, to finance a business, or to buy other things, the case for making the loan “non-recourse” is less compelling than it is for a purchase money mortgage, which is used only for the purchase of the house."
See http://blogs.wsj.com/developments/2010/12/08/walking-away-from-your-home-a-live-chat-with-author-brent-white/ - 2:29pm

4:29 pm December 22, 2010

Desi Erasmus wrote:

In short, White is encouraging holders of mortgages on houses that are worth much less than the outstanding balance on the note to do what the Mortgage Bankers' Association did when they found themselves in the same situation: turn in the keys.

Not paying your mortgage is a completion of the mortgage contract. Certainly, it is not the completion that the bank or home buyer originally contemplated, but a completion nonetheless. STAYING IN YOUR HOME RENT FREE IS A BENEFIT TO YOUR LENDER. Vacant homes are subject to all sorts of damage, vandalism, and deferred maintenance issues that further diminish their value. So, mow the lawn, tend the pool, and take good care of the house. Most banks will pay you "cash for (house) keys" if you follow this advice. Good Luck!

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